Eurocurrency market theory

Eurocurrency market theory explains how international banks and financial institutions manage and lend currencies outside their home countries, primarily in the Eurocurrency market. This market enables the free flow of deposits and loans in various currencies, often at favorable interest rates, away from government controls and regulations. It provides firms and governments with flexible financing options and influences global interest rates. The theory highlights how these offshore markets operate based on supply and demand for currencies, affecting currency values, inflation, and international capital movement. Essentially, it describes the functioning and impact of global money markets beyond domestic boundaries.